Lies The Digital Age Told You About Selling Cars [Chapter 1]

| by David Metter, President of AutoHook powered by Urban Science

As part of Urban Science, it’s in our blood to question everything. Not only do we look outside the box to solve complex problems, but we then question each element that makes up the box, down to each individual line, 90-degree angle and the composition of positive and negative space that define the constraints of the box. Better yet, approaching a problem from a true scientific perspective means questioning why the box even exists in the first place. While the process can be painstaking, making observations through the unbiased lens of science can also lead to accidental discoveries.

Granted, for someone who started in the business as a car salesman and later managed dealerships, using scientific methods to make decisions in the showroom isn’t the first and most natural inclination for many of us. And when I say science, I mean actual science – not the junk out there that claims to be science (remember when everyone threw around the term “big data”), but the kind of science that has no skeptics, that sees trends within a data set that not only others don’t, but that no one’s even thought to look for before.

When we hear a number or statistic over and over again, especially one published by a known source, we believe it to be true because…why wouldn’t we? We all know not everything we read on the internet is true, but this example is perhaps the ideal case in point of one widely accepted “truth” the automotive industry has come to accept without any empirical evidence whatsoever.

Automotive leaders in search, analytics, digital advertising and consumer behavior have all published findings stating the number of dealerships customers visit before purchasing a vehicle is somewhere between 1.3 and 1.6 dealerships. This number has been kicked around at conferences for years. So naturally, we decided to challenge the claim that customers visit less than two dealerships before buying a car.

In May of 2018, AutoHook and Urban Science decided to conduct our own survey. We asked real consumers we know bought a car within the last year how many dealerships they visited prior to their purchase. Out of 2,748 responses, what we found is people are visiting more dealerships than we thought. According to the survey results, people on average visit at least 2.4 dealerships before buying a car.

Furthermore, 70% of customers surveyed visited two or more dealerships before purchasing. Almost half, 46% to be exact, said they visited three or more dealerships before purchasing, and 26% said they visited four or more dealerships. The unfortunate reality is that we’ve all been thoroughly brainwashed with the misconception that people only go to about one dealership before buying a car which we now know is not the case.

Regardless of whether customers visit two dealerships or five dealerships, the takeaway here is that everything we’ve been told about consumer buying behavior in the digital age is skewed. The truth is that today’s car shoppers go to at least 2 dealers before purchasing. What’s so significant about this finding is that it proves people have a choice and decisions are being made both on AND offline. The blindly accepted notion that the majority of car shoppers have already made up their mind on what to buy and where to buy before ever stepping foot in a dealership is completely false. In fact, in another study completed by AutoHook and Urban Science, 78% of over 66,000 respondents said they were still shopping multiple brands before visiting their first dealership.

The underlying message we’ve all come to believe is that customers are making buying decisions based largely if not solely on what they read online…which by the way conveniently plays to the ultimate gain of the big publishers, search and media companies. Maybe they are doing this so dealers and OEMs will continue to spend more and more money with said companies on their digital advertising, but we don’t have the science to back that up just yet.

Anyways, down here in the real world, cars are still bought and sold in physical showrooms and the process is still dependent upon a positive exchange between two living, breathing people. The only difference between today and 50 years ago is that customers walk in armed with information and salespeople need to provide a less painful buying experience. Other OEM-specific customer surveys AutoHook conducts on an ongoing basis show that when asked why they didn’t buy a car from a particular brand, the overwhelming majority of respondents selected “bad dealership experience” as their #1 reason for not purchasing.

So, if you think people are going to fewer dealers than they were ten years ago, it may be because the experience they expect to have when they’re at a dealership is a negative one. Not always – I know plenty of dealers who recognize the importance of their people and the in-store experience they provide, and I also know these dealers sell much more effectively as a result. This alone makes the argument that dealers need to focus more attention on hiring and retaining better salespeople who understand the value of relationships if they’re interested in repeat, loyal customers.

Another common misconception is that millennials are taking over the market and they buy everything online; therefore dealers need to move towards models where ~99% of their selling happens online, and their salespeople just need to walk the customer through the paperwork upon arrival. The first part of that statement is true in that Millennials are quickly overtaking the market as they now account for almost 30% of all new vehicles sold. By 2020, JD Power and Automotive News project they will account for 40% of all new vehicle sales.

What’s NOT true is the assumption that Millennials want to buy their cars online. In fact, it’s the exact opposite. The test drive experience is more important to the Millennial generation than ever before, so much so that they want to extend the test drive experience to get a solid feel for how a vehicle will fit into their everyday lifestyle. Millennials also spend more time on the buying process and are less brand-loyal than previous generations. As a result, we see more and more extended test drive programs popping up like Toyota’s Try Before You Buy program which allows customers to take home a vehicle of interest from anywhere between 24 hours to a full week.

Again, whether the total number of dealerships visited before a purchase is 2.4 or 3.4, the more important point is that people have choices and if they go to a dealer ready to buy and have a negative in-store experience I can confidently say based on data (and common sense) that they’re going to leave and buy from someone else.

I’m not saying everything we know about digital is dead, and I’m in no way trying to tell dealers to kill or even cut their digital ad spending. But what I am saying is we as an industry need to seriously reevaluate the amount of time, energy, and most importantly, money we spend on what we know is vital to selling cars and the ongoing growth and success of a dealership…good salespeople.

What Dealers Don’t Know About Their “Best” Salespeople

by David Metter

As it turns out, what you don’t know about your salespeople can hurt you. I am not sure why, but we don’t often associate analytical tools as the best way to measure the performance of the people we hire to connect with our customers and build lasting relationships. I’m a common sense guy, so if my staff is hitting their numbers and selling cars, there’s really no reason for concern or to take a deeper dive into the opportunities they’re working…right? Not necessarily.

What I’ve come to accept over the last few years is that when good data is presented in a way we can easily understand, it has a tendency to challenge everything we “think” we know about selling cars. Too many of us think that we are the “Presidents of the I Think Club.” I learned that from one of the truly smart guys in the car business, Gary Marcotte, over 10 years ago and I've never forgotten it. 

Dealers have always been able to see their close rates, or how many opportunities each salesperson successfully converted into a vehicle sold. But there is an entire other half (or I could argue 2/3) of the story they haven’t been getting – and that’s how many opportunities they didn’t close and purchased a car from someone else – or in other words, their defection rate. When you layer in data that shows defection rates to competing dealers or brands in your market, it gives life to a story we’ve not only never been able to see before, but one we never even thought to look at before.

I sold cars for seven years, spent years as a sales manager, then the General Manager of a dealership and I eventually became the CMO of large dealer group with 1,100 salespeople to account for. It would have been impossible to analyze every opportunity every person in our organization touched – so the first time I saw this data in action I was blown away.

Take a look at the graph below. The blue line shows how many cars each individual sold during this 3-month time frame. The gray lines show you the number of opportunities that salesperson touched that went on to buy from someone else – whether it was a same make competitor in your market (light gray) or from a competing brand (dark gray).

In this example, this dealership thought that John was one of their best salespeople. But when you look at your CRM data with a 3-dimensional lens and layer that lost sale (defection) data on top of it, you start to see the true story behind your “all-star” players. You see how many opportunities John touched that went on to purchase from your competitor down the street or from a different brand entirely.

In reality, Jordan is this dealer’s best salesperson. Based on the opportunities he was working, he sold substantially more than he lost. In fact, out of everyone, he lost the least amount of opportunities. So success doesn’t always translate to selling more cars than you did last month. It can also mean losing fewer opportunities to competitors.

Here’s another example. The screen shot below shows the actual effectiveness of a salesperson as they compare to the dealership overall. So in this case, Jim may only be selling 8 cars a month, but because he’s not getting all the opportunities, his effectiveness is 149% - meaning he’s outperforming based on the leads he’s getting. Bill on the other hand might be getting way too many opportunities and he might look like one of your best sales people, but he’s really only about 47% effective towards closing everything he touches.

Your best salespeople are the ones who consistently deliver HIGH close rates and LOW defection rates. But you need that defection data to see who your real winners and losers are. Think about it like this, a pitcher that has a lot of saves, but has equally if not more blown saves, doesn’t really help the team. Or if a starting pitcher has 10 wins but has 14 losses, is he really a great pitcher? If you only looked at saves or wins, you might think so but when you can see everything at once, the story changes. This is the same sort of comparison.

Keep in mind that if a salesperson has a high defection rate, it may not always be their fault. Maybe they’re being assigned far too many leads than any one person is capable of handling. Or the types of leads they’re working come from providers with low overall close rates. There are all these other factors involved. But those are topics for a different day.

If dealers look at their business through this new lens, they will start seeing trends of opportunity and loss that they can’t see by just looking at their own data and what happens within the four walls of their dealership. In order to determine true success or failure you also need to look at the sales effectiveness outside of your dealership.

HOW TO SELL CARS IN 1939: Uncovered Documents Reveal Not Much has Changed…

by David Metter

Could it be possible that the secret to selling cars in today’s multi-touch, exponentially data-driven society is exactly the same as it was prior to World War II? I know what you’re thinking. This is either a huge stretch or some sort of joke. However, recently uncovered sales training documents dating back to 1939 tell a very unexpected story that directly parallels the fundamental methods dealers need to sell more cars today.

This handbook published by General Motors in 1939 on how to manage new car sales was recently passed along to me, and as I read through it, I was completely blown away. I think anyone who has been in the car business for a while will appreciate this…

It states, “The sales manager must have a keen desire to check such things as the number of people buying competitive cars with whom his own organization has been in contact, the reasons why such deals were lost, the reasons why any particular competitor is making headway locally, and similar vital facts to which the average dealer pays little or no attention.”

In one sentence from a 219-page book from 78 years ago, we can derive three secrets to selling cars that remain true today. Not only are these tactics relevant to the way dealers currently operate, but they are also the difference between a dealership that’s running successfully and efficiently and a dealership on the verge of failure.

Below are the three operational insights that have endured in this industry throughout generations, wars, and the age of the Internet that changed everything as we know it…  or did it? These takeaways will continue to be the foundation of how to sell cars in 2017 and into the future.

Dealers need complete visibility into:

1. The number of people buying competitive cars that your own dealership has been in contact with.
2. The reasons or sources responsible for these lost opportunities. 
3. The reasons why a local competitor may own more market share than you do.

This is so interesting to me because these are things GM recognized back in 1939 and STILL today we struggle with being able to put our finger on the number of opportunities we lose each month and the sources (or people) responsible for these losses. A sales manager that concerns themselves with not just their own dealership’s performance but also the performance of their top competitors and defection rates to other dealers or brands is a sales manager with A LOT of common sense!

If a customer is walking into your store, interacting with your staff, and leaving to purchase a vehicle from somewhere else, there’s always a story to uncover as to why. The problem in the digital world we live in is that dealers lack visibility into all the different sources, touchpoints, and online or in-person interactions that may have played a roll in a lost sale.

A lot of these operational inefficiencies are due to the fact that we can only see data from a one-dimensional perspective. What I mean by that is dealers don’t have a comprehensive, multifaceted view of all their different deposits of data – specifically, your CRM & DMS for the following reasons:

• You can only see the leads that come into your dealership.
• You only see the opportunities you’re working.
• Ultimately when leads get to your DMS you can see sales, but what you don’t see is the customers that defected and who they bought from.
• You don’t see the dealership next door and what is in their CRM and you CERTAINLY can’t see what’s in their DMS, and that’s a HUGE blind spot.

Because of the fact that no two dealers are the same and no two markets are the same, there will always be a different sickness, prescription, and remedy for each and every dealership. If you have a clear view into the ailments in your processes associated with each lost sale, you can then derive the information you need to make beneficial changes to reduce your rate of defection both to other brands or other same make dealers in your market.

Identifying the number of lost sales opportunities in your CRM is just the first step. The second is integrating technology that exposes where the problems are in your sales processes. Maybe it’s a third party lead provider with a high close rate and a high defection rate - meaning you need to go after leads from that particular source more aggressively or put more marketing dollars towards those leads to reduce the defection rate.

Or maybe you have a salesperson with a high close rate and a low defection rate that should be handling more opportunities. Maybe you have high defection rates tied to a particular model in your inventory, so you then know it would be a good idea to increase incentive offers around that vehicle.

Most vendors and digital advertisers only provide a one-sided perspective of your data, which is why big data has been so limiting at the dealership level. Dealers know they’re losing sales, but they don’t know where, to who, or why. If you can see the full picture, you can then start to put together the pieces of the puzzle around whether or not you had the right inventory, or did you have the right selling strategy against your competitors, and who are you truly competing with? The obscure, blurry picture of your market’s sales trends starts coming into focus. So in summary, what we need to do is start incorporating that 1939 mentality back into the way we operate.